25 June 2011

Risk Management (Insurance) - Important to married couples

Today I just met up with a financial adviser from company A - tied agency in Singapore. He was quite a nice guy for treating me a cup of coffee at Coffee Bean. He told me that Aviva just started to have their own agencies since few years ago and his team just joined Aviva as tied agency few months back. They signed an agreement / contract with Aviva for 4 years staying there. It is too bad that I didn't ask in detail on the reasons why his team jumped from company P to company A.

During our 1-to-1 conversation, he requested my financial figures such as Asset, Liabilities, Cash Inflows and Cash Outflows etc. As I mentioned to him that I will be a sole proprietor soon starting August, and the basic salary after deducting CPF would be around $1.6K, he seems like lost interest with me as I am a just a small fish to him. :p

However, there is some information I would like to share with you:

If you are Singaporean or SG PR, you are able to upgrade/enhance your medi-shield plan to get a better coverage. I will ask in detail from him again.

If you are getting married or already married, please buy a life insurance which covers critical illness & disability. His suggestion for the protection figure is around 5 * gross annual income. As my gross annual income would be 24000, so my protection figure is around 120K sgd.

The financial adviser (FA) suggests that to have different life policies for husband and wife. His reason was that it will become very complicated if the husband and wife divorce one day later.

As a business owner (where his income depends on how good his business is), his suggestion is to purchase investment link product (ILP) instead of traditional insurance. The reason is that ILP provides flexibility of the payment term such as partial withdrawal / premium holidays etc that traditional life insurance cannot provide.

As a conclusion, I believe that it is necessary to have an insurance plan which suits to your needs and capabilities. Having says that, my suggestion to you is not to allocate more than 10% of your monthly salary to the monthly premium payment as it will affect your speed of growing your portfolio. Most importantly is to stay healthy and happy always. :)

You are saying not to allocate more than 10% of salary in insurance as it will affect the speed of growing our investment. But one illness may wipe out a large portion of our portfolio. Definitely do agree that investments are important. In fact, insurance and investments are like the defender and striker in a soccer team, we need to strike a balance between both.

Thanks for your comments. The reasons why I mentioned not to allocate >10% of salary in insurance is that I see insurance as protection. Let me give you example: I open a chicken rice shop. Let's say my money can buy 10 chickens and because of I need to protection during 30 yrs that I open the chicken rice shop, I have to use the money to buy 1 chicken to protect me. If I buy too much protection, I still can only have money to buy 10 chicken (earning streams) and i will buy less than 9 chicken.

I believe in insurance as a protection. But having too much protection doesn't help us much.

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